THE European Investment Bank was preparing for the break-up of the euro last night by allowing Greek firms to repay loans in its former currency, the drachma.

The European Investment Bank was preparing for the break-up of the euro last night []

Greece’s Public Power Corporation is the first to agree to the currency clause in return for a £55million loan from the EIB.

The change in policy comes amid concerns that the struggling country may not be able to remain in the single currency for much longer.

The EIB will also include a revised currency measure in new loans with Ireland and Portugal. And it is planning to extend it gradually to all eurozone countries.

MEP Godfrey Bloom, UK Independence Party’s economics spokesman, warned: “This act by the EIB shows that at least one institution of the European Union has raised its eyes above the parapet and seen what is going on in the real world.

“Of course, the EIB has to work in the markets. Not to factor in Greek withdrawal would make their balance book look decidedly dodgy.

This act by the EIB shows that at least one institution of the European Union has raised its eyes above the parapet and seen what is going on in the real world.

MEP Godfrey Bloom, UK Independence Party’s economics spokesman

“That they are using English law to draw up the contracts also shows the EU, despite its bluster and transparent desire to rip chunks out of the City, recognises that London is still the place to do business.” But the EIB denied that the move indicated the bank was preparing for a Greek exit from the euro.

Spokeswoman Helen Kavvadia confirmed the clause was a new standard procedure that would be applied to other countries.

But she claimed it merely allowed companies to repay loans in a different currency from the one in which it was disbursed. She said: “The bank, certainly in this crisis and volatile environment, is adjusting its security contracts in many countries, not only Greece.”

Economists argue that despite the help, the Greek economy is too weak to recover and that it will eventually have to return to the drachma. The Luxembourg-based EIB gives low-interest loans to firms in and around the EU to boost growth in underdeveloped regions.

Greece’s beleaguered government agreed to push through deep spending cuts in exchange for the vital bail-out. It was the 12th country to join the euro in 2001 despite warnings about its economy.